The battle for paying digital customers was lost before it had truly begun. In 1999, Napster started on campuses full of broke students, that simply didn’t want to or couldn’t spend the money for music they desired. Napster helped to change the way most people get music, and it also lowered the price point from $14 for a CD to free and the whatever the current prancing on iWorld might be.
Indeed it is a little dodgy to compare the 2000s with the 1990s in terms of album pricing, or the value customers did see in music, since the ’90s faced an unnatural sales boost when consumers replaced their cassette tapes and vinyl records en masse with CDs.
“The digital music business has been a war of attrition that nobody seems to be winning,” said David Goldberg, the former head of Yahoo music. “The CD is still disappearing, and nothing is replacing it in entirety as a revenue generator.”
“That four-year lag (between Napster 1999 and iTunes being launched in 2003) is where the music industry lost the battle,” said Sonal Gandhi, music analyst with Forrester Research. “They lost an opportunity to take consumers’ new behavior and really monetize it in a way that nipped the free music expectation in the bud.”
Today only 56% of Americans who buy digital music think that that music is worth paying for (!)according to Forrester. The volume of unauthorized downloads continues to represent about 90% of the market, according to online download tracker BigChampagne Media Measurement.
Forrester forecasts music industry revenues will continue to decline until it reaches about $5.5 billion a year by 2014, as new revenue sources begin to lift sales again.
That means the music industry has 4 years to find a way to rebuild trust and make customers believe in a value of their products again. Any ideas?